Nedgroup Appoints New Manager for Rainmaker Fund Following Ten Years of Underperformance

Nedgroup Investments has appointed a new manager for the once-popular Rainmaker Fund after an extended period of underwhelming performance.

The fund, which manages approximately R6.5 billion in assets, has underperformed its benchmark (the average within the Asisa Equity: General category) over the past one, three, five, seven, and ten years. Notably, this benchmark itself has lagged behind the FTSE/JSE Capped Shareholder Weighted All Share Index and the All Share Combined (before the Swix index) for around a decade.

Read: These two flagship unit trusts have underperformed CPI over a decade [Jan 2024]

Abax Investments (formerly Polaris Capital), established in 2003 as a boutique asset manager, has been managing the Rainmaker Fund for Nedgroup Investments since its inception in 2000. The investment team at Abax has also overseen the fund’s management since the beginning. In addition, Abax manages the Flexible Income Fund, Opportunity Fund, and Entrepreneur Fund for the bank’s investment division.

Monitoring the manager ‘closely’

In its 2021 annual report, Nedgroup Investments highlighted that “in 2020, we also revised the mandate of the Nedgroup Investments Rainmaker Fund to permit the manager to invest up to 30% of its portfolio in offshore equities.”

“The fund returned 23.6% in 2021. However, its longer-term performance (3.8% per annum over five years) is disappointing, prompting our continued close monitoring of the manager.”

Read: SA reforms spur money manager Abax to boost exposure [Jul 2024]

Following changes announced by National Treasury, the maximum offshore allocation increased to 45%. In 2023, it was noted that the “fund had a decent year (9% for 2023), but the longer-term results remain disappointing (4.6% per annum over five years). We will continue to monitor the manager closely.”

In comes Ninety One …

On December 11, Nedgroup Investments announced its plan to replace Abax as the Rainmaker Fund manager with the “Ninety One quality team.”

Nic Andrew, head of Nedgroup Investments, noted that the decision follows a thorough review and aligns with their Best of Breed philosophy to ensure optimal outcomes for clients.

Listen/read: Ninety One remains positive despite concerning outflow volumes [Nov 2024]

Nedgroup argues that “in 2020, the mandate was altered to include global equities, and in 2022, the SARB [South African Reserve Bank] raised the prudential offshore limits to 45%, allowing nearly half of the portfolio to be allocated to global equities. Considering this, Nedgroup Investments evaluated the requirements for managing such an equity mandate.”

Andrew stated: “Given the mandate change to include almost 50% global equities and the fund’s performance, we concluded it was in the best interest of investors for Nedgroup Investments to explore better options to align with the fund objectives.”

Read: Have investors been ditching SA’s biggest asset managers? [May 2023]

After a comprehensive review using Nedgroup Investments’s rigorous Best of Breed standards, the Ninety One Quality Team was chosen to take over management of the flagship fund for Nedgroup Investments, pending regulatory approval.

“We believe the Ninety One Quality team is well-suited to manage this mandate due to their robust capabilities and proven success in both South African and global equities. They embody the qualities we seek in our partner managers, and we trust that their expertise will lead to superior results for our clients.”

Exclusive access point

The Rainmaker Fund will serve as the exclusive access point to the Ninety One Quality capability within a South African General Equity Fund.

Thabo Khojane, MD of Ninety One South Africa, remarked: “We are honored to be chosen by Nedgroup Investments as a Best of Breed manager for the Rainmaker Fund and look forward to a long partnership.”

Clyde Rossouw, head of the Ninety One Quality Team, added: “Our team is excited to provide investors in the Rainmaker Fund with our extensive experience in managing both South African and global equities.

“We are fully dedicated to achieving the fund’s objective of delivering long-term returns.”

As of the end of November, the Rainmaker Fund’s top 10 holdings included FirstRand (5.3%), Naspers (4.9%), Anglo American plc (4.3%), Pepkor Holdings (4.2%), British American Tobacco plc (3.5%), Sanlam (3%), Visa Inc (2.9%), Microsoft Corp (2.9%), Amazon (2.9%), and Bidvest (2.9%). Foreign equities represented 41.7%, with an additional 1.4% in offshore cash.

Abax remains a key partner

Andrew emphasized that Abax Investments continues to be a crucial associate for Nedgroup Investments.

“Abax Investments will keep managing the Nedgroup Investments Opportunity Fund, the Nedgroup Investments Flexible Income Fund, and the Nedgroup Investments Entrepreneur Fund. All of these funds have generated superior returns, and we are confident they will maintain this trend.”

Over the last year, the Rainmaker Fund experienced net outflows of R71 million in Q3, R85 million in Q2, and R72 million in Q1, according to Asisa data.

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